Criteria Repayment Mortgages
Criteria for the FairLife Repayment Mortgage Mark
The Mark will be awarded based on a provider’s upfront declarations and will be retained based on adherence to the following criteria.
1. The first criterion is a maximum loan to value of [95%].
2. The second criterion is that customers may only be charged under prescribed headings.
- The second criterion requires that licensees use standardised terms when charging customers to help make FairLife mortgages easier to understand and compare. This criterion will come into force once a set of standardised terms are agreed by the industry.
3. The third criterion is that the mortgage lender must provide a total cost of holding the mortgage until the end of the first offer period.
- A FairLife Repayment Mortgage provider must provide the information necessary to calculate the total cost of holding the mortgage until the end of the first offer period. It should also encourage any third parties highlighting the mortgage to calculate the APR for the customer based on these costs.
4. The fourth criterion is fair treatment of financial hardship.
- Where customers’ behaviour indicates possible financial difficulties, the providers’ correspondence should: include that the customer has a FairLife mortgage and recommend that the customer contact either the lender themselves or a provider of free debt advice (such as a FairLife debt advisor) if they are having difficulty meeting payments.
- Before steps are taken to repossess a property the provider must have given a grace period of at least 3 months and evidenced that the provider has tried to contact the customer to agree an affordable repayment plan.
- Documents sent to the customer in connection with arrears or repossession must display the FairLife mark or state that the mortgage is a FairLife Repayment Mortgage.
5. The fifth criterion is fair treatment of financial hardship.
- The fifth criterion requires that the licensee places the FairLife Repayment Mortgage Mark on either the mortgage offer letter and/or mortgage contract for qualifying products which will be sold as FairLife Repayment Mortgages.
Criteria detail and examples
The first criterion is a cap on the loan to value.
FairLife promotes the responsible use of debt. As economic conditions improve such a cap prevents a return to reckless borrowing. Prior to the recession products offering LTVs of 100% and more encouraged some consumers to take up loans which could become unaffordable in the longer term.
Criteria one is not designed to disadvantage customers who have suffered property price depreciation. Where a customer is remortgaging or porting their mortgage without increasing the loan size criteria one need not apply. Exceptions may also be allowed from time to time to accommodate initiatives such as Government-backed help-to-buy schemes.
The second criterion is that the customer may only be charged under prescribed headings.
A recent survey by the Consumer Association ‘Which?’ highlighted that in aggregate UK mortgage providers use in excess of 40 different terms for charges . Which? has launched a campaign called Stop Sneaky Fees and Charges and has called on the Government to act.
FairLife marked products and services are designed where possible to assist customers who are not financially aware. To this end the charity is working with stakeholders within the industry to draw up a prescribed set of terms for use with its mortgages.
The third criterion is that the mortgage lender must calculate a [Total Cost Percentage Rate] when providing mortgage quotes.
A FairLife Repayment Mortgage provider must offer a clear illustration of the total cost of the mortgage over the first offer period. The [Total Cost Percentage Rate] combines the interest rate payable on the mortgage with all fees and charges.
The [Total Cost Percentage Rate] is designed to help make the overall cost of the mortgage clearer. A standardised metric for comparing mortgage deals at different providers would improve consumer choice, giving individuals the ability to shop around and select accurately the best deal for them. Where a mortgage has a variable rate component the [Estimated Cost Percentage Rate] would take the current interest rate as the basis for the calculation.
The fourth criterion is fair treatment of financial hardship.
A FairLife Repayment Mortgage provider must make reasonable efforts to ensure that the mortgagor does not lose their home should they face temporary difficulties in meeting their monthly mortgage payments. This should include giving a grace period of at least  months and seeking to agree an affordable repayment plan .
In addition, providers are required where practical to display the FairLife mark on all correspondence relating to arrears and repossessions (or state that the mortgage is a FairLife Repayment Mortgage). Consumers struggling with debt often have multiple creditors and the experience of their debts being pursued can be very harrowing, especially for the vulnerable. It is hoped that consumers will be reassured when a majority of the companies they deal with display the FairLife Mark.
Finally, where financial difficulties are suspected, the provider should recommend that the customer contact either the lender themselves or a provider of free debt advice (such as a FairLife debt advisor). If the customer is having payment difficulties they will likely be receiving this advice from other sources such as FairLife personal loan providers, credit cards, higher-purchase agreements etc. The consistent FairLife charity branding should help to prevent the paralysis that can be caused by this stressful situation and encourage the customer to discuss their circumstances at an early stage.
The fifth criterion is display of the FairLife Mark.
A key benefit of the FairLife charity is the brand awareness that will be achieved by having a consistent Mark spanning all areas of finance. It will give comfort to people ranging from vulnerable clients in debt to the elderly sorting out their pensions. This will be achieved by licensees putting the FairLife Mark on to their clients’ quotes and contracts in a similar manner to the way manufacturers put a fair trade mark onto their goods.
Only contracts displaying the FairLife Mark are part of the FairLife initiative. If a licensee with multiple Mortgage products puts a FairLife Mark on two of them, that firm will be deemed to have two FairLife Repayment Mortgage products. In this way FairLife offers a route by which customers can see very clearly whether they have a FairLife product and providers can evolve their mortgage product range to become more consumer-centric.
To download a summary of the mark click here
To download a licence for the mark